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One of the highly challenging aspect of hospital is to manage the revenue cycle

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Prof M Mariappan, Chairperson, Centre for Hospital Management, School of Health Systems Studies, Tata Institute of Social Sciences, in interaction with Sanjiv Das, chalks down strategies for hospital management

Hospital management is one of the most recent concepts in the field of management courses. How has this stream of study evolved over the years?

Hospital management or administration as a discipline has been existing for more than six decades India. It is evolving slowly and has reached to some level during the last five years. Hospital administration was introduced in All India Institute of Medical Sciences (AIIMS) and Indian Army Hospitals and Tata Institute of Social Sciences, Mumbai had started this programme over five decades ago. At present, hospital administration has been viewed in many ways on the clinical ground – some of the institutions offering MD in Hospital Administration, which are mostly focussing on management of clinical services and enhance the clinical quality. Such institutions offer this programme only to medical graduates. Other institutions are looking at hospital administration as a management programme. These type of institutions offer hospital administration to all graduates. It is seen that both are serving the need of modern hospitals.

In the past, hospitals were managed by medical officers who use to do administrative work along with clinical activities. But this scenario is getting changed due to development of professionalism in hospital management. Further, Indian healthcare is strongly oriented towards curative care. Therefore, a large number of hospitals are created with huge infrastructure, facilities, human resources, system and process.

Today, it is seen that modern hospitals cannot be managed without trained person in hospital management. Hospital management programme is offered by nearly 40 institutions and approximately 3000 graduates are released every year across the country. Students are trained and are procuring academic degrees like certificates, diplomas, post graduate diplomas, executive programmes, master degrees, MPhil and PhD. Hospital administration is continuously growing and is an emerging field in India.

School of Health Systems Studies (SHSS), Tata Institute of Social Sciences (TISS) has been offering Master of Hospital Administration programme for over two and a half decades along with MPhil and PhD programme in Hospital Administration. Apart from these, Centre for Hospital Management under the SHSS offers Executive and Post Graduate Diploma Programmes for working persons. This includes Executive Post Graduate in Hospital Administration (EPGDHA) for Indian students, Executive Post Graduate in Hospital Administration (EPGDHA) for Afghanistan students, Post Graduate Diploma in Healthcare Quality Management (collaboration with NHSRC) for government and private sector candidates exclusively to promote quality improvement in public and private sector, and Management Development programmes.

What strategies would you recommend for those hospitals who need to revisit their revenue cycles?

One of the highly challenging aspect of a hospital is to manage the revenue cycle. Basically, revenue cycle means the hospital provides input in form of resources which include equipment, infrastructure, human resources and materials. These are converted through appropriate process including work methods, practices, standards and quality improvement tools towards healthcare delivery or services (output). The hospital shall be charging for the services rendered to the patients. This will become the revenue for the hospital. Again, this revenue is used for purchasing resources and used through the process and create services for generating revenue. This is called revenue cycle and is an ongoing process.

It is seen that generating revenue in a hospital is a highest challenge within a structured condition. Healthcare services are the outcome of various financial measures: for example, huge capital investments, number of operational and non-operational expenses. A majority of the hospitals fail to understand the implication of huge investment and operational aspects in the strategic point of view. Further, there has been a lack of understanding with regards to operational efficiency, cost structure, technological pressure, workforce inefficiency, market condition and competition, etc.

There are certain common practices in which hospitals can ensure their revenue cycles maintained properly.

  • Hospitals have to improve the operational efficiency, patient satisfaction, application of cost reduction and cost control technique and quality improvement.
  • Make sure that every patient shall appreciate your service and carry great experience while leaving the hospital. They should be your ambassador.
  • Work with community closely, understand their requirement and modify the services as per their need
  • Work with corporate clients, insurance and TPS and ensure that there is no accumulation of accounts receivables.
  • Practice best methods of management of resources including utilisation of HR, materials, energy services and other sources
  • Regularly monitor the cost and revenue by implementing performance and quality indicators
  • Try to collaborate with like-minded organisations towards learning, sharing services and exchanging ideas

It is important to note that the hospital should be best patient-centred care centre rather than highly advanced technical centre.

What are the challenges faced by hospitals in managing cost efficiencies?

Over the years, hospitals have become complex organisations where exclusive knowledge and skills are needed to manage them well. Further, modern hospitals have become highly investment-oriented institutions. It is to be noted whether it is private, public or charitable hospitals, financial management becomes a major issue. Public hospitals need to take cost-effective measures and offer services to a large number of population. Also, they should ensure that adequate revenue is achieved by recovering cost from the customer. Further, hospitals are facing huge challenges due to environmental issues which include internal (within the hospital) and external (outside the hospitals – nationally and globally). Within the organisation, the hospital is expected to satisfy the patient, improve its strategic position, constantly focus on growing demand of hospital patients, ensuring productivity, maximising the profit or better cost recovery mechanism. With respect to external environment meeting the community demands, shareholders demand, facing national and global competition, technology advancement and other factors, hospitals need to have the ability to achieve cost, increase the value to patients or customer, revenue cycle and risk management.

  • If the hospital fails to understand and is unable to manage, it may loose the patient/clients. Therefore, it is important to focus on managing the cost.
  • In this regard, the basic challenges are understanding the cost structure e.g. Variable cost versus Fixed cost or Direct Cost versus Indirect Cost through an appropriate costing information system.
  • Secondly, the hospital management should be able to develop strategic cost data that should be used to ascertain the profitability of hospital revenue centres and regularly identify the scope cost reduction and cost control projects.

Some of the cost reduction and cost control projects are

  • Work force analysis: Time and motion work study, method study, process improvement, full time equivalent studies.
  • Resource utilisation: Productivity analysis, process reengineering, multiskilling and multitasking, benchmarking and standardisation, quality improvement exercises, application of quality and performance indicators, activity-based costing, budgeting, value analysis and other tools.

There is a huge gap between private and public hospital infra. What is the reason behind this and what will be your recommendations to minimise this gap?

It is true that there is a huge gap between the public and private sector infrastructure. This is because the private sector has to meet the customer demand, face the competition with other hospitals and try to gain competitive advantage. On the other hand, public sector hospitals are managed through tax payers money. Tax payers money is not just meant for only healthcare. Healthcare is one of the number of essential projects of the government. Therefore, there is always a limitation in terms of building resources to the government or public health facilities. These gaps can be reduced by utilising the resources optimally by collaborative effort between the government and the private sector. It is found that nearly 50 per cent of their infrastructure is not adequately utilised by private sector. On the other hand, the public sector is always having shortage of resources equally and therefore the government can identify the unutilised resources of private sector or encourage private sector to participate in various government projects which would reduce the gap.

Unfortunately, the public sector/private sector is unable to move together due to goal differentiation. The private sector is expected to generate profit and the public sector has to work on the basis of non-profit motive. As a result, huge resources are getting wasted without being used optimally.

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